Holding

AFGIS is a "State" under Article 12 of the Constitution, making the writ petitions maintainable.

Summary

The appellants, employees of the Air Force Group Insurance Society (AFGIS), challenged the Society's decision to revise their pay scales without linking them to the Sixth Pay Commission, filing writ petitions in the Delhi High Court. The High Court dismissed the petitions, holding that AFGIS could not be classified as a "State" or "other authority" under Article 12 of the Constitution, rendering the petitions non‑maintainable. On appeal, the Supreme Court examined the cumulative tests of financial, functional and administrative control laid down in Ajay Hasia, Pradeep Kumar Biswas and related precedents. It noted that AFGIS was created by presidential sanction, its board consists entirely of serving Indian Air Force officers on deputation, membership and contributions are compulsory, it enjoys tax exemptions, and it performs a public welfare function for armed‑forces personnel. The Court concluded that these factors demonstrate deep and pervasive governmental control, qualifying AFGIS as a "State" within Article 12. Consequently, the writ petitions were held maintainable and the appeal was allowed, restoring the High Court's jurisdiction to hear the employees' grievances.

Issues considered

Whether the Air Force Group Insurance Society (AFGIS) can be treated as "State" or "other authority" within the meaning of Article 12 of the Constitution of India

Legislation cited

Constitution of Indias. Article 12
Societies Registration Act, 1860

Headnote

Issue for Consideration Whether the Air Force Group Insurance Society (AFGIS) could be treated as “State” or “other authority” within the meaning of Art.12 of the Constitution of India. Headnotes† Constitution of India – Art.12 – The appellants are scales of the workers were sought to be revised in accordance with the Sixth Pay Commission of the Government of India – Writ petitions – High Court held that that the Air Force Group Insurance Society could not be treated as “State” or “other authority” within

Subjects

Article 12 of ConstitutionInstrumentality of StateWrit MaintainabilityDeep and Pervasive ControlAir Force Group Insurance Society (AFGIS)Consolidated Fund of IndiaStatePractical governanceFinancial control

Judgment

[2026] 4 S.C.R. 112 : 2026 INSC 233

Ravi Khokhar & Ors.
v.
Union of India & Ors.
(Civil Appeal No. 3351 of 2026)
12 March 2026
[Sanjay Karol* and Vipul M. Pancholi, JJ.]

Issue for Consideration
Whether the Air Force Group Insurance Society (AFGIS) could be
treated as “State” or “other authority” within the meaning of Art.12
of the Constitution of India.

Headnotes†
Constitution of India – Art.12 – The appellants are employees
of the Air Force Group Insurance Society – The pay scales
of the workers were sought to be revised in accordance with
the Sixth Pay Commission of the Government of India – Writ
petitions – High Court held that that the Air Force Group
Insurance Society could not be treated as “State” or “other
authority” within the meaning of Art.12 of the Constitution of
India, therefore the writ petitions filed were not maintainable –
Correctness:
Held: In view of this Court, a perusal of the documents make out
a case for AFGIS to be considered ‘State’ within the meaning of
Art.12 – The Hon’ble President of India granted sanction for AFGIS
to be established and also specifically approved the deputation
Rules – When the aspect of administrative control is examined,
it is seen that all the members of the Board of Trustees, so also
the Managing Committee are serving members of the IAF and are
deputed to AFGIS for a fixed period – In essence, therefore, the
administration of the Body is entirely in the hands of Government
servants even though the body itself is a purportedly private, a
self-contained society – This Court is of the considered view that
AFGIS does indeed perform a public duty – The protection and
welfare of armed forces personnel is a core government function –
Providing insurance coverage is a public function as it addresses
a collective obligation the State has towards a defined public class
whose service is indispensable – Insurance to service members

* Author
[2026] 4 S.C.R. 113

Ravi Khokhar & Ors. v. Union of India & Ors.

is a critical instrument for safeguarding their physical, mental
well-being, dignity and economic security – It is also seen that at
one-point AFGIS itself claimed to be Government while claiming an
exemption from service taxes, since it is under the control of Ministry
of Defence – Thus, AFGIS would be ‘State’ under Art.12 – The
writ petition before the High Court accordingly, maintainable – The
said writ petition on the grievance of the appellants is restored.
[Paras 15, 17-19]

Case Law Cited
Ajay Hasia and Others v. Khalid Mujib Sehravardi and Others
[1981] 2 SCR 79 : (1981) 1 SCC 722; Pradeep Kumar Biswas and
Others v. Indian Institute of Chemical Biology and Others [2002]
3 SCR 100 : (2002) 5 SCC 111 – followed.
Zee Telefilms Ltd. v. Union of India [2005] 1 SCR 913 : (2005) 4
SCC 649; Ramana Dayaram Shetty v. International Airport Authority
of India [1979] 3 SCR 1014 : (1979) 3 SCC 489 – relied on.
Chander Mohan Khanna v. National Council of Educational
Research and Training [1991] Supp. 1 SCR 165 : (1991) 4 SCC
578; Rajkaran Singh v. Union of India [2024] 8 SCR 516 : 2024
SCC OnLine SC 2138 – referred to.
Sagarika Singh v. Union of India and Other, 2011 SCC OnLine
Del 3612; Ex. Sub. Rajender Singh v. Union of India and Others,
2013 SCC OnLine Del 1598 – referred to.

List of Acts
Constitution of India; Societies Registration Act, 1860.

List of Keywords
Article 12 of Constitution; Instrumentality of State; Writ Maintainability;
Deep and Pervasive Control; Air Force Group Insurance Society
(AFGIS); Consolidated Fund of India; State; Practical governance;
Financial control.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3351 of 2026
From the Judgment and Order dated 01.02.2023 of the High Court
of Delhi at New Delhi in WP (C) No. 5024 of 2017
114 [2026] 4 S.C.R.

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Appearances for Parties
Advs. for the Appellant(s):
Shoeb Alam, Sr. Adv., Sourav Roy, Udai Khanna, Anshu Deshpande,
Pranav Bafna, Hemant Gupta.
Advs. for the Respondent(s):
Vikramjeet Banerjee, A.S.G., Mukesh Kumar Maroria, B Sunita Rao,
P V Yogeswaran, Ms. Sakshi Kakkar, Praneet Pranav, Navanjay
Mahapatra, Abhishek Khanna, Ankur Chibber, Anshuman Mehrotra,
Nikunj Arora, Prahil Sharma, Vardhman Kaushik.

Judgment / Order of the Supreme Court

Judgment

Sanjay Karol, J.

Leave Granted.

THE CONTROVERSY IN A NUTSHELL
2. The Appellants are employees of the Air Force Group Insurance
Society1 established under the Societies Registration Act, 18602
in the year 1976, with sanction of the Hon’ble President of India,
having been received in the same year on 6th October. The dispute
germane to this lis is that while the Board of Trustees, had, vide
special meeting dated 27th December 2016 decided that the pay
scales of the workers would be revised in accordance with the Sixth
Pay Commission of the Government of India, subsequently, by way
of meeting dated 13th February 2017 resolved that pay structures
would be revised in a way that any linkage/connection to and pay
parity with the Central Government, by virtue of the Pay Commissions
be done away with, and according thereto, asked all employees by
way of notice dated 22nd May 2017 to sign their acceptance to the
revised terms.

1 AFGIS
2 SRA
[2026] 4 S.C.R. 115

Ravi Khokhar & Ors. v. Union of India & Ors.

THE IMPUGNED JUDGMENT
3. The appellants, aggrieved thereby, filed Writ Petitions before the
High Court of Delhi3 which were dismissed by a common judgment
dated 1st February 2023. The findings of the Learned Division Bench
can be summarised as follows:
3.1 The Court’s central finding was that none of the respondent
organisations, namely the Air Force Group Insurance Society, the
Air HQs Non-Public Fund Organisation, or the CRPF Employees’
Educational Society, could be treated as “State” or “other
authority” within the meaning of Article 12 of the Constitution of
India. This determination was foundational, because the Court
held that unless the respondents satisfied the requirements
of Article 12, the writ petitions under Article 226 were not
maintainable and the Court cannot not adjudicate on claims
relating to pay parity, service conditions, promotions, retirement
age, or implementation of Pay Commission recommendations.
In examining the status of the Air Force Group Insurance
Society, the Court found that it is a Society registered under
the Societies Registration Act, 1860, established in 1976 as
a self-contained and self-run welfare and insurance scheme
meant exclusively for Air Force personnel and their families.
While senior Air Force officers form part of the Board of
Trustees and certain officers are posted with the Society
on deputation, the Court held that this association does not
translate into deep or pervasive governmental control. The
day-to-day administration of the Society is carried out under
its own internal governance framework, and its finances are
sourced entirely from member contributions and the insurance
fund rather than from any budgetary allocation or grant from the
Central Government. The Court placed particular reliance on
the appointment letters of AFGIS employees, which expressly
state that their service conditions are governed by the Rules
of the Society as amended from time to time. The Court noted
that there is no statutory or contractual guarantee of parity with
Central Government employees and that allowances and pay
structures are subject to approval by the Board of Trustees.

3 WP(C) No. 5024 of 2017; WP(C) No. 16428 of 2022, CM APPL 51620 of 2022; WP(C) No. 6759 of 2022;
WP(C) No. 13858 of 2018; WP(C) No. 863 of 2019; WP(C) No. 15835 of 2022 & CM APPL. 49280 of 2022.
116 [2026] 4 S.C.R.

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The Court, therefore, concluded that even if historical parity
with Central Government pay scales had existed in practice,
it did not create any enforceable legal right nor did it convert
AFGIS into an instrumentality of the State.
3.2 While addressing the legal tests applicable to Article 12, the
Court reaffirmed the principles laid down by the Constitution
Bench of the Court in Ajay Hasia and Others v. Khalid Mujib
Sehravardi and Others4, which emphasised that the decisive
question is not how an entity is created but whether it functions
as an instrumentality or agency of the Government. The Court
further relied on Pradeep Kumar Biswas and Others v.
Indian Institute of Chemical Biology and Others,5, where
the Supreme Court clarified that the tests laid down in Ajay
Hasia (supra) are not rigid and that the cumulative facts must
demonstrate financial, functional, and administrative domination
by the Government, with control that is deep and pervasive.
The Court also drew support from Chander Mohan Khanna v.
National Council of Educational Research and Training6,
which cautioned against an over-expansive interpretation of
Article 12 merely on the basis of governmental association or
assistance.
The Court specifically rejected the petitioners’ reliance on
Sagarika Singh v. Union of India and Others7, noting that the
reasoning in that decision had subsequently been disapproved
by a larger Bench of the Delhi High Court in Ex. Sub. Rajender
Singh v. Union of India and Others8,. The Court observed that
the larger Bench had clarified that welfare or insurance schemes
connected with the armed forces cannot automatically be treated
as “State” in the absence of pervasive governmental control,
and that the earlier view taken in Sagarika Singh (supra) no
longer represents good law.
3.3 Applying these settled principles to the facts of the present cases,
the Court concluded that all the respondent organisations are

4 (1981) 1 SCC 722
5 (2002) 5 SCC 111
6 (1991) 4 SCC 578
7 2011 SCC OnLine Del 3612
8 2013 SCC OnLine Del 1598
[2026] 4 S.C.R. 117

Ravi Khokhar & Ors. v. Union of India & Ors.

autonomous, self-funded societies established for the limited
benefit of their members and not for the public at large. The
Court found no evidence of financial dependence on the Central
Government, nor any administrative or functional domination
of the kind required to attract Article 12. Consequently, the
writ petitions were held to be not maintainable. The interim
protection granted in one of the petitions was vacated, and all
petitions were dismissed with liberty granted to the petitioners
to pursue their remedies before appropriate alternative forums
such as civil courts or labour adjudicatory bodies.
3.4 It has to be noted that the status of certain other bodies as
“State” within the meaning of Article 12 was also a question
before the High Court, namely Air HQs Non-Public Fund
Organisation and CRPF Employees’ Educational Society, but
since the determination in respect thereof is not under challenge
before us, we need not enter into the particulars thereof.

THE CASE OF THE PARTIES

A. The Appellants
4. We have heard Mr. Shoeb Alam, learned senior counsel for the
appellants. It is submitted that AFGIS has represented itself to be
‘Government’ in official correspondence. As an example, a letter dated
15th March 2016 was shown. The cumulative test is financial functional
and administrative dominance of the Government and accordingly it is
submitted that the day-to-day affairs are managed by serving senior
officers of the Indian Air Force9. The very establishment was with the
sanction of the Hon’ble President of India, and membership of this
Organisation is compulsory for all Officers and Airmen. Further, the
land on which the office is situate has been granted by the Ministry
of Defence, Government of India, and it also enjoys exemptions
from various taxes levied. Still further, it is also highlighted that the
functions performed by AFGIS are of public importance and welfare
oriented. Heavy reliance is placed on a recent judgment of this
Court in Rajkaran Singh v. Union of India10, wherein this Court

9 ‘IAF’
10 2024 SCC OnLine SC 2138
118 [2026] 4 S.C.R.

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examined the issue concerning employees of a compulsory savings
fund being entitled to benefits of the Central Pay Commission,
which was answered in the affirmative given alignment of service
conditions, pervasive government control and public function. As
such, the appellants, being similarly placed would also be entitled to
the benefits of the 7th Pay Commission in line with the past position
where they have been granted the said benefits.

B. Respondent-AFGIS
5. Mr. Ankur Chibber, learned Counsel appeared for AFGIS and
submitted that the body is not ‘State’ within the meaning of Article
12 for it is a self-financed, non-public fund society. The premiums
paid by the members are deducted centrally by the Air Force Central
Accounts Office and then remitted to the Organisation. This is the only
source of funds, and it has no inflow or outflow from the Consolidated
Fund of India. During the time when the officers of IAF come to the
Organisation on deputation their salary and allowances are borne by
the AFGIS itself. It also employees 47 civilian staff members who are
not government servant. The members of the Board of trustees are
ex-officio and do not receive any remuneration in respect of these
duties. The accounts are maintained by a privately hired Chartered
Accountant and AFGIS does not submit any report to the Comptroller
and Auditor General of India. It is as such submitted that the High
Court’s holding in the impugned judgment that a petition under Article
226 will not be maintainable, is the correct position in law.

C. Respondent-UNION OF INDIA
6. Mr. Vikramjeet Banerjee, learned ASG appeared for the Union of
India and supported the stand of AFGIS.

CONSIDERATION ON MERITS
7. Since the advent of the Constitution, the question of whether a
particular body can or cannot be recognised as ‘State’ within the
meaning of Article 1211 has arisen time and again. Initially, this Court

11 Article 12 of the Constitution of India reads thus:
“12. In this Part, unless the context otherwise requires, “the State’’ includes the Government and
Parliament of India and the Government and the Legislature of each of the States and all local or other
authorities within the territory of India or under the control of the Government of India.”
[2026] 4 S.C.R. 119

Ravi Khokhar & Ors. v. Union of India & Ors.

adopted a narrow and formalistic approach focusing on whether
the body concerned which was created under a statute was part
of the traditional Government structure. Over the time however,
as functions of the Government expanded multi-fold there was
a shift in this approach. State instrumentalities, corporations and
autonomous bodies were recognised as covered under this Article,
with the shift to a functional and purposive analysis. The test to be
satisfied pertained to the nature of functions, character of activity,
degree of governmental control. This ensured that the breadth or
scope of examination when this question arises is not limited to
ownership/origin but is instead informed by accountability, the rule
of law in furtherance of practical governance. It shall be useful to
refer to certain cases to exemplify the requirements that need to be
established for an organization be held to be “State”.
7.1 P.N Bhagwati J. (as His Lordship then was) writing for the Court
in Ramana Dayaram Shetty v. International Airport Authority
of India12, observed:
“14. A corporation may be created in one of two
ways. It may be either established by statute or
incorporated under a law such as the Companies Act,
1956 or the Societies Registration Act, 1860. Where
a corporation is wholly controlled by Government not
only in its policy-making but also in carrying out the
functions entrusted to it by the law establishing it or
by the charter of its incorporation, there can be no
doubt that it would be an instrumentality or agency
of Government. But ordinarily where a corporation is
established by statute, it is autonomous in its working,
subject only to a provision, oftentimes made, that it
shall be bound by any directions that may be issued
from time to time by Government in respect of policy
matters. So also a corporation incorporated under law
is managed by a board of directors or committees
of management in accordance with the provisions
of the statute under which it is incorporated. When
does such a corporation become an instrumentality

12 (1979) 3 SCC 489, ‘R.D Shetty’
120 [2026] 4 S.C.R.

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or agency of Government? Is the holding of the
entire share capital of the corporation by Government
enough or is it necessary that in addition, there should
be a certain amount of direct control exercised by
Government and, if so, what should be the nature
of such control? Should the functions which the
corporation is charged to carry out possess any
particular characteristic or feature, or is the nature
of the functions immaterial? Now, one thing is clear
that if the entire share capital of the corporation is
held by Government, it would go a long way towards
indicating that the corporation is an instrumentality
or agency of Government. But, as is quite often
the case, a corporation established by statute may
have no shares or shareholders, in which case it
would be a relevant factor to consider whether the
administration is in the hands of a board of directors
appointed by Government, though this consideration
also may not be determinative, because even where
the directors are appointed by Government, they may
be completely free from governmental control in the
discharge of their functions. What then are the tests
to determine whether a corporation established by
statute or incorporated under law is an instrumentality
or agency of Government? It is not possible to
formulate an all-inclusive or exhaustive test which
would adequately answer this question. There is
no cut and dried formula which would provide the
correct division of corporations into those which are
instrumentalities or agencies of Government and
those which are not.”
7.2 A Constitution Bench in Ajay Hasia (supra) following the tests
laid down in R.D Shetty (supra)held as under:
“9. The tests for determining as to when a corporation
can be said to be an instrumentality or agency of
Government may now be culled out from the judgment
in the International Airport Authority case [(1979) 3
SCC 489] . These tests are not conclusive or clinching,
[2026] 4 S.C.R. 121

Ravi Khokhar & Ors. v. Union of India & Ors.

but they are merely indicative indicia which have to be
used with care and caution, because while stressing
the necessity of a wide meaning to be placed on the
expression “other authorities”, it must be realised that
it should not be stretched so far as to bring in every
autonomous body which has some nexus with the
Government within the sweep of the expression. A
wide enlargement of the meaning must be tempered
by a wise limitation. We may summarise the relevant
tests gathered from the decision in the International
Airport Authority case [(1979) 3 SCC 489] as follows:
“(1) One thing is clear that if the entire share capital
of the corporation is held by Government, it would go
a long way towards indicating that the corporation is
an instrumentality or agency of Government. (SCC
p. 507, para 14)
(2) Where the financial assistance of the State is so
much as to meet almost entire expenditure of the
corporation, it would afford some indication of the
corporation being impregnated with Governmental
character. (SCC p. 508, para 15)
(3) It may also be a relevant factor ... whether the
corporation enjoys monopoly status which is State
conferred or State protected. (SCC p. 508, para 15)
(4) Existence of deep and pervasive State control
may afford an indication that the corporation is a
State agency or instrumentality. (SCC p. 508, para 15)
(5) If the functions of the corporation are of public
importance and closely related to Governmental
functions, it would be a relevant factor in classifying
the corporation as an instrumentality or agency of
Government. (SCC p. 509, para 16)
(6) ‘Specifically, if a department of Government is
transferred to a corporation, it would be a strong
factor supportive of this inference’ of the corporation
being an instrumentality or agency of Government.”
(SCC p. 510, para 18)
122 [2026] 4 S.C.R.

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If on a consideration of these relevant factors it is
found that the corporation is an instrumentality or
agency of Government, it would, as pointed out in
the International Airport Authority case [(1979) 3 SCC
489] , be an “authority” and, therefore, ‘State’ within
the meaning of the expression in Article 12.”
7.3 A bench of seven Judges in Pradeep Kumar Biswas v. Indian
Institute of Chemical Biology13 speaking through Ruma Pal J.,
referred to the previous decisions of the Court and held as under:
“38. … “these are merely indicative indicia and are
by no means conclusive or clinching in any case”. In
that case, the question arose whether the National
Council of Educational Research (NCERT) was a
“State” as defined under Article 12 of the Constitution.
NCERT is a society registered under the Societies
Registration Act. After considering the provisions of
its memorandum of association as well as the rules
of NCERT, this Court came to the conclusion that
since NCERT was largely an autonomous body and
the activities of NCERT were not wholly related to
governmental functions and that the government
control was confined only to the proper utilisation
of the grant and since its funding was not entirely
from government resources, the case did not satisfy
the requirements of the State under Article 12 of the
Constitution. …
39. Fresh off the judicial anvil is the decision in Mysore
Paper Mills Ltd. v. Mysore Paper Mills Officers’ Assn.
[(2002) 2 SCC 167 : 2002 SCC (L&S) 223 : JT (2002)
1 SC 61] which fairly represents what we have seen as
a continuity of thought commencing from the decision
in Rajasthan Electricity Board [AIR 1967 SC 1857 :
(1967) 3 SCR 377] in 1967 up to the present time.
It held that a company substantially financed and
financially controlled by the Government, managed
by a Board of Directors nominated and removable

13 (2002) 5 SCC 111
[2026] 4 S.C.R. 123

Ravi Khokhar & Ors. v. Union of India & Ors.

at the instance of the Government and carrying
on important functions of public interest under the
control of the Government is “an authority” within
the meaning of Article 12.
40. The picture that ultimately emerges is that the
tests formulated in Ajay Hasia [Ajay Hasia v. Khalid
Mujib Sehravardi, (1981) 1 SCC 722 : 1981 SCC
(L&S) 258] are not a rigid set of principles so that
if a body falls within any one of them it must, ex
hypothesi, be considered to be a State within the
meaning of Article 12. The question in each case
would be — whether in the light of the cumulative facts
as established, the body is financially, functionally and
administratively dominated by or under the control of
the Government. Such control must be particular to
the body in question and must be pervasive. If this is
found then the body is a State within Article 12. On
the other hand, when the control is merely regulatory
whether under statute or otherwise, it would not serve
to make the body a State.
(emphasis supplied)

Recently in Rajkaran Singh (supra), on which
great reliance has been placed by the appellant,
this Court while dealing with the question whether
the compulsory savings deposit fund of the Special
Frontier Force, was ‘State’ or not whether the
benefit of the 6th Central Pay Commission would be
extended to the employees thereof or not. In para
26 of the abovesaid judgment the concluding paras
of Pradeep Kumar Biswas (supra) were reproduced
and thereafter applied to the instant facts. The
concluding paras of the latter judgment indicate the
following – to be an authority within the meaning
of Article 12 the entity should either be a creation
of statute or be created under a statute functioning
with liabilities and obligations to the public; Tests 1,
2 and 4 in Ajay Hasia (supra) are determinative of
ownership and tests 3, 5 and 6 are functional test.
124 [2026] 4 S.C.R.

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It is thereafter observed that “Neither all the tests
are required to be answered in the positive nor a
positive answer to one or two tests would suffice. It
will depend on a combination of one or more of the
relevant factors depending on the essentiality and
overwhelming nature of such factors in identifying
the real source of governing power…”
7.4 The discussion made by N. Santosh Hegde J, writing for the
majority in Zee Telefilms Ltd. v. Union of India14, is important
for the present purposes. It was held:
“31. Be that as it may, it cannot be denied that the
Board does discharge some duties like the selection
of an Indian cricket team, controlling the activities
of the players and others involved in the game of
cricket. These activities can be said to be akin to
public duties or State functions and if there is any
violation of any constitutional or statutory obligation
or rights of other citizens, the aggrieved party may
not have a relief by way of a petition under Article
32. But that does not mean that the violator of such
right would go scot-free merely because it or he is
not a State. Under the Indian jurisprudence there
is always a just remedy for the violation of a right
of a citizen. Though the remedy under Article 32 is
not available, an aggrieved party can always seek a
remedy under the ordinary course of law or by way
of a writ petition under Article 226 of the Constitution,
which is much wider than Article 32.
…
33. Thus, it is clear that when a private body exercises
its public functions even if it is not a State, the
aggrieved person has a remedy not only under the
ordinary law but also under the Constitution, by way
of a writ petition under Article 226. Therefore, merely
because a non-governmental body exercises some

14 (2005) 4 SCC 649
[2026] 4 S.C.R. 125

Ravi Khokhar & Ors. v. Union of India & Ors.

public duty, that by itself would not suffice to make
such body a State for the purpose of Article 12. In
the instant case the activities of the Board do not
come under the guidelines laid down by this Court
in Pradeep Kumar Biswas case [(2002) 5 SCC 111 :
2002 SCC (L&S) 633] hence there is force in the
contention of Mr Venugopal that this petition under
Article 32 of the Constitution is not maintainable.”
(emphasis supplied)

8. We now proceed to evaluate the rival contentions in the light of the
judgments referred to supra. It is not in dispute that (a) membership
of AFGIS is compulsory for all officers and Airmen; (b) the contribution
of premiums are automatically deducted from the salaries; (c) the
Board of Trustees comprises entirely of senior serving IAF officials;
(d) service at AFGIS is considered to be proper deputation for officers
and the sanction for this Body as also its deputation rules was granted
by the Hon’ble President of India; (e) AFGIS periodically reports its
financial transactions to a senior officer in the IAF; (f) in letter dated
15th March 2016 AFGIS itself accepts its position as ‘Government’;
(g) the President has accorded sanctions on separate occasions
viz., introduction of substantive post in the Society, specific fixation
of pay bands; and (h) the Society is exempt from various taxes
given its compulsory nature as also automatic deduction from pay,
AFGIS has a monopoly over insurance for IAF members. Let us
unpack these points.
9. For points (a), (b), (f) and (g) the relevant portion of the letter dated
15th March, 2016 referred to supra are reproduced below:

“2. xxx xxx xxx
(e) Para 5: As regards the issue of submission of ITR along
with form 26 as for the period from 2010-11 to 2014-15,
it is informed that this Society is established under the
authority of Ministry of Defence, Govt of India to be run
departmentally as a self-contained Society vide GOI, MoD
letter No Air HQ/25657/17/D/Accts/1197 DOLA (Air-11)/76
dated 06 Oct 1976 and that this Society is registered under
the Society Registration Act (XXI of 1860) and also that
126 [2026] 4 S.C.R.

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this Society has been established by the Armed Forces of
the Union of India (Air Force) for the welfare of the past
and present members (air warrior / air veterans) and their
dependents. The principal objective of the Society is to
collect the mandatory and compulsory deduction from the
air warriors so as to provide the financial relief in case of
contingencies of death/disability of the air warrior occurring
while in service/post retirement. Further, the Society also
provides welfare services to air warriors / air veterans and
their dependents by payment of survival (saving element of
the mandatory and compulsory deduction) on retirement/
death. The income of the Society is exempted from Income
Tax u/s 10(23)(C)(iv) of Income Tax Act 1961 as notified
vide MoF letter No F.275/29/85-IT(B) dated 05 Jun 1985.

xxx xxx xxx

3. xxx xxx xxx
(c) Basis of the Working of the AFGIS: Consequent
to the aforesaid sanction/approvals, the contributions
by air warriors to AFGIS have been made mandatory
and compulsory in terms of Air Force Instructions (AFI)
16/87 issued by the Govt of India (Ministry of Defence).
The monthly mandatory contributions are compulsorily
deducted from the salary of all air warriors (officers,
airmen and NCs(E)) from the day they join IAF. Hence,
membership to the group insurance has become an integral
part of the Service Conditions. It is pertinent to mention
here that the AFGIS, like Army Group Insurance and Naval
Group Insurance, caters only to ‘Men in Uniform’ and is
not open to civilians or the general public. AFGIS does
not issue any insurance policies to the air-warriors for its
insurance schemes.

xxx xxx xxx
(g) Relationship between AFGIS and its Air Warrior
Members.
One of the primary factors for deciding the applicability of
Service Tax is the relationship between a service provider
[2026] 4 S.C.R. 127

Ravi Khokhar & Ors. v. Union of India & Ors.

and service receiver wherein there is a “flow of service”.
AFGIS is a self-contained Society run departmentally under
the authority of Govt of India (Ministry of Defence). The
insurance schemes run by AFGIS are exclusively for the
air warrior members hence the group is a “Closed Group”.
Membership and contribution to the schemes is compulsory
and mandatory. Following examples regarding decisions
given by the Courts could further clarify this matter.
(i) In the case of Saturday Club Ltd v/s Assistant
Commissioner, Service Tax, 2006 (3) STR 305;
the Hon’ble High Court of Calcutta observed that,
“Principally there should be an existence of two sides/
entities for having transaction as against consideration.
In a members club there is no question of two sides.
‘Members’ and ‘club’ both are same entity. One may
be called as ‘Principal’ while the other may be called
as ‘Agent’ and therefore, such transaction in between
themselves cannot be recorded as income, sale or
service as per applicability of the revenue tax of the
country.”
(ii) In the matter of New Delhi CESTAT in the case
of Federation of Indian Chambers of Commerce &
Industry (FICCI) v/s Commissioner of Service Tax,
Delhi (2015) 38 S.T.R. 529 (New Delhi - CESTAT)
wherein the Tribunal held that the service by FICCI
to its members is not liable for payment of service
tax owing to ‘Principle of Mutuality’.
(h) AFGIS is controlled by the Govt. of India through the
Ministry of Defence and Air HQ and hence is “Government”
in terms of Finance Act, 1994. AFGIS acts as a wing of
the Government and hence the collection received from
its members is outside the purview of the service tax
primarily on the basis of “Principle of Mutuality” and by
virtue of Section 66 D of the Finance Act, 1994 wherein
the service of ‘Government’ is outside the purview of the
Service Tax.

xxx xxx xxx”
128 [2026] 4 S.C.R.

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Air Force instruction dated 1st October 1987 mandating membership
of AFGIS is as under:-
COPY
AIR FORCE INSTRUCTION
NO – 16
New Delhi, Thursday, October 1, 1987/Asavina 9, 1909
COMPULSORY MEMBERSHIP-GROUP INSURANCE
SCHEME
1. The membership under Air Force Group Insurance
Society for the Insurance Scheme in existence at the
time of joining Indian Air Force will be compulsory
for the following:-
(a) Officers
(b) Airmen
(c) NCs(E)
(d) Flight Cadets
2. All personnel who are members of Enhanced Group
Insurance Scheme 1982 of Air Force Group Insurance
Society shall automatically become members of any
other Insurance Scheme floated in future by the Air
Force Group Insurance Society. The will be liable
to pay insurance premium for the new scheme as
fixed by the Air Force Group Insurance Society from
time to time.
3. All personnel who are not members of Enhanced
Group Insurance Scheme 1982 but are members of
Group Insurance Scheme 1975 or 1978 can become
members of any new insurance scheme floated by
Air Force Group Insurance Society after becoming
members of Enhanced Group Insurance Scheme
1982, for which they will be required to pay the
insurance premium applicable for 1982 scheme from
01 Apr 82 till the date the new schemes come into
force. Premium paid under 1975 and 1978 Schemes
will be retained and paid at the time of retirement will
applicable rates of interest.
[2026] 4 S.C.R. 129

Ravi Khokhar & Ors. v. Union of India & Ors.

4. These provisions take effect from the date of issue
of this AFI.
Case No. Air HQ/24018/16/PP&R-1/D (Air-III)
Min of Def/(Fin) UO No. 1410/Pay/AF of 1987
Sd/-
(R.K. Dhir)
Dy Secretary
10. For point (c), reference may be made to the Manual of Administration
and Management, Air Force Group Insurance Society (Published
under the Authority of Board of Trustees AFGIS) 2009
CHAPTER 2
ADMINISTRATION
Board of Trustees
1. The Society will be administered by a Board of
Trustees and a Managing Committee as per the
details given in succeeding paras.
2. The Board of Trustees constitute the following:-
AOA — Chairman
DG(IBS) — Member
DCAS — Member
AOM — Member
AOP — Member
ACAS (Accts) — Member
PD AFGIS — Member Secretary
18. Secretary. The Secretary shall be an officer of the
rank of Gp Capt of the Accounts Branch and will be on
deputation to the Society as per the terms and conditions
approved by the Government. His appointment will be
approved by the Chairman, Board of Trustees. He will
conduct day to day administration and be responsible to
Principal Director, AFGIS on all matters of the Society. He
shall perform the following functions:-
(a) Carry out administrative duties as may be entrusted
to him by Principal Director, AFGIS.
130 [2026] 4 S.C.R.

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(b) Give notice of the meeting to the members of Board
of Trustees/Managing Committee and prepare briefs on
all agenda points to be sent to the members.
(c) Attend all meetings of the Board of Trustees and
Managing Committee unless prevented by illness or
excused from attending by the Chairman and record the
Minutes of all meetings of the Board of Trustees.
(d) Communicate decisions of the Board of Trustees/
Managing Committee to concerned executives for
implementation.
(e) Be responsible for the efficient functioning of Claims,
Advances, PRIC and Contribution Sections and correct
maintenance of connected records.
(f) Conduct correspondence o behalf of the Board of
Trustees and Managing Committee
(g) Finalise and settle all death, disability and survival
benefit claims duly approved by the appropriate authority.
(h) prepare the annual report of the Society for approval
by the Board of Trustees.
(j) Perform the duties of Principal Director and JD (Fin) in
the absence of the permanent incumbent.
(k) Approve expenditure as per the financial powers
delegated within the overall budget limit approved by the
Board of Trustees.
(l) Put up proposals for investment of funds of the Society.”

xxx xxx xxx
11. For points (d), the following letter is extracted:-
11(5)2000/DOI/DOI/D(Air-III)
Government of India
Ministry of Defence
New Delhi dated the 27th Mar 2002
To
The Chief of Air Staff
(with 15 Spare copies)
[2026] 4 S.C.R. 131

Ravi Khokhar & Ors. v. Union of India & Ors.

Subject: GENERAL TERMS & CONDITIONS FOR
DEPUTATION OF OFFICERS TO AIR FORCE GROUP
INSURANCE SOCIETY
Sir,
I am directed to convey the sanction of the President
to the general Terms & Conditions for deputation of IAF
officers to Air Force Group Insurance Society as laid down
in Annexure ‘A’ of this letter.
3. This issues with the concurrence of Ministry of Defence
(Finance) vide their u.o. No.543/P&W/AF dated 22 Mar
2002.
Yours faithfully,
(G. Srinivasan)
Desk Officer
12. For point (e) relevant portion of Manual of Administration and
Management, AFGIS:-
35. Monitoring System On 25th of every month, PD AFGIS
is to apprise ACAS (Accts) on the case flow of AFGIS,
bringing out the details of all investment during the previous
30 days. He is also to make a structured presentation to
AOA of investment status, the quotations received during
the previous quarter along comparative statements, their
forecast appreciation of the investment environment the
next quarter and the case flow assessment of the next
quarter. At the end of every quarter the performance
analysis of the investment is to be put up to both for their
perusal.
13. For point (g) reference is made to the following letters dated 25th
February 1985 and 28th September 1981:-
“No.Air HQ/5.18172/22/3/PC-26/Plans/361/DOIIA/
D(Air-III)
Government of India,
Ministry of Defence,
New Delhi, the 25th February, 1985
132 [2026] 4 S.C.R.

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To
The Chief of the Air Staff (with 35 spare copies)
SUBSTANTIVE CADRE OF GROUP CAPT AND
ABOVE - DIRECTOR OF GROUP INSURANCE
SOCIETY
Sir,
I am directed to refer to this Ministry’s letter No. Air
HQ/S.18172/22/3/Plans/3750/D(Air-III)/62 dated 15th May,
1974 as amended from time to time and to convey the
sanction of the President to the inclusion of one post of
Air Cmde (Accts) in the substantive cadre of Air Cmde
(Accts) so long the post of director of Group Insurance
Society is held by an Air Force Office and its deletion from
the existing substantive cadre/of Group Cap-t (Accts).
2.⁠ ⁠This issues with the concurrence of Ministry of Defence/
(Finance/Division)vide their u.o. No. 351/Org/S/AF of 1985.
Yours faithfully,
(H.D. SHARMA)
DESK OFFICER

xxx xxx xxx

Appendix ‘E’
(Refers to para 9 of
Chapter 3)
No. Air HQ/24011/71 PP & R-1/2282/DOIIB/D (Air III)
Government of India/Bharat Sarkar
Ministry of Defence /Raksha Mantralaya
New Delhi, the 28 September, 1981
6th Asvina, 1903 Sako Era
To
The Chief of the Air Staff,
Subject: Enhancement of Flying Pay-Air Force Personnel
[2026] 4 S.C.R. 133

Ravi Khokhar & Ors. v. Union of India & Ors.

Sir,
1.⁠ ⁠I am directed to refer to para 9(b) of AFI 4/S/74 as
amended and Serial No.12 of Appendix ‘B’ to AFI 2/S/74,
as amended and to state that the president is pleased
to decide that with effect from 01 Sep 1981, the rates of
flying pay will be enhanced as under:-
(i) Wing Commander and below
Rs.750.00 pm
(ii) Group Caption and Air Cmde
Rs.666.00 pm
(iii) Air Vice Marshal and above
Rs.600.00 pm
(iv) Airmen including JWOs, WOs and MWOS
Rs.374.50 pm
2.⁠ ⁠The increased flying pay will be admissible subject to
additional insurance cover as given below, taken through
Air Force Group Insurance Society (AFGIS):-
(a) Officers of the flying branch are required to obtain
additional life insurance cover against all risks,
including flying for a minimum of Rs.2 Lakhs effective
from 01 Oct 81, on payment of monthly contribution
as given below:-
(i) Wing Commander and below
Rs.325.00 pm
(ii) Group Captain and Air Cmde
Rs.283.00 pm
(iii) Air Vice Marshal and above
Rs.250.00 pm
(b) Officers of the Ground duty Branches, entitled
to flying pay will be required to obtain additional life
134 [2026] 4 S.C.R.

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insurance cover against all risks, including flying, for
a minimum of Rs.2 Lakhs effective from 01 Oct 81,
on payment of monthly contribution as applicable to
equivalent ranks of the flying branch only during the
period of entitlement of flying pay.
(c) Airmen aircrew, entitled to flying pay, will be
required to obtain additional life insurance cover
against all risks, including flying for a minimum of
Rs. One Lakhs effective from 01 Oct 81, on payment
of monthly contribution of Rs.162.00 only during the
period of entitlement to flying pay.
(d) The Air Force Group Insurance Society will pay
Survival Benefit to persons covered under the above
insurance scheme on retirement/release, the amount
of which will be determined by the said Society from
time to time.
3. (a) The amount payable to the Group Insurance Scheme
is to be recovered from IRLAs of officers and airmen from
the pay of Sep 81 onwards and paid by the Air Force Central
accounts Office to Air Force Group Insurance Society in
respect of personnel for whom IRLAs are maintained, on
the day pay for the month is disbursed.
(b) (i) Deputationists and other officers and airmen for
whom no IRLAS are maintained at Air Force Central
Accounts Office and who are entitled to enhance flying
pay, are to obtain insurance cover for the amounts,
as applicable by remitting the contributions to Air
Force Group Insurance Society for the flying pay to
be admitted.
(ii) In the case of the existing deputationist and other
officers and airmen for whom no IRLAs are maintained
by Air Force Central Accounts Office and who are
entitled for enhanced flying pay contributions are to
be remitted by them direct to the AFGIS latest by 01
Jun 82. However, the contributions will have to be
made wef 01 Oct 81.
[2026] 4 S.C.R. 135

Ravi Khokhar & Ors. v. Union of India & Ors.

(iii) In the case of the officers mentioned above whom
no IRLAs are maintained by AFCAO, the controlling
officers will admit flying pay only on receiving a
certificate/receipt from the Air Froce Group Insurance
Society to the effect that the individual has contributed
for the month(s) for which flying pay is admitted.
(c) In view of the provisions made in sub paras (a) &
(b) (iii) above, no certificate of payment of insurance
premium will be required to be given by OC Unit and no
POR is necessary, in respect of this additional insurance
cover. However, the flying pay certificate prescribed in the
Appendix ‘G’ to AFI 2/S/74 and Appendix ‘C’ to AFI 2/S/74
will continue to be furnished.
4.⁠ O
⁠ ther conditions governing flying pay including insurance
cover required under the earlier orders remain unchanged.
5.⁠ A
⁠ FI 4/S 74 and AFI 2/S/74 will be amended in due course.
6.⁠ ⁠This issues with the concurrence of Min of Fin (Def)
vide their No.2622/Pay/ AA of 1981.
Yours faithfully,
Sd/-
(N.N. Mathur)
Desk Officers

xxx xxx xxx”

14. For point (h) the Notification dated 31st October 1983 exempting the
Society from estate duty is extracted below:-
“Appendix ‘D’
(Refers to para 8
of Chapter 1)
TO BE PUBLISHED IN PART II SECTION 3-SUB
SECTION (1) OF THE GAZETTE OF INDIA
Government of India
Central Board of Direct Taxes
New Delhi, the 31” October, 1983
136 [2026] 4 S.C.R.

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NOTIFICATION
ESTATE DUTY
GSR 841, Whereas the Central Government is of opinion
that circumstances are such that some relief in addition
to the relief provided in sub section (i) of Section 33 of
the Estate Duty act, 1953 (34 of 1953) should be given
in respect of the following class of property belonging to
the deceased which passes on his death and in respect
of which estate duty is liable to be levied and collected
under the said Act, namely, the money payable under Army
Group Insurance Scheme or the Naval Group Insurance
Scheme or the Air Force Group Insurance Schemes as
the case may be, in existence on the date of publication
of this Notification in the Official Gazette. Now, therefore,
in exercise of the power conferred by sub section (2) of
the section 33 of the Estate Duty Act, 1953 (34 of 1953),
the Central Government hereby directs that no estate
duty shall be payable in respect of the aforesaid class
of property.
Sd/
(Arvind Pinto)
Under Secretary to the Government of India
(F.No.296/7/83-ED)
Notification dated 5th June 1985 exempting AFGIS from
income tax, is as under:-
“Appendix ‘B’
(Refers to para 7(c) of Chapter 1)
Copy
TO BE PUBLISHED IN PART II SECTION 3 (II) OF
THE GAZETTE OF INDIA
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
NEW DELHI, TIME 5th JUNE, 1985
[2026] 4 S.C.R. 137

Ravi Khokhar & Ors. v. Union of India & Ors.

NOTIFICATION
INCOME TAX
S.O. In pursuance of sub clause (f) of clause (iii) of sub
section (3) of section 194A of the Income Tax Act, 1961
(43 of 1961), the Central Government hereby notifies the
Society known as Air Force Group Insurance Society, New
Delhi, for the purpose of the said sub- clause.
(F. No. 275/29/85-IT (B)
Sd/-
(B.Nagarajan)
Deputy Secretary to
the Govt of India

xxx xxx xxx”

15. In our view, a perusal of the documents extracted supra make out
a case for AFGIS to be considered ‘State’ within the meaning of
Article 12. For the aspect of deep and pervasive control, we observe
that the Hon’ble President of India granted sanction for AFGIS
to be established and also specifically approved the deputation
Rules; the Principal Director (AFGIS), every month is to apprise the
Assistant Chief of Air Staff regarding the cash flow of AFGIS which
ensures monitoring by a core member of the IAF on the activities
of AFGIS; the membership and deductions arising therefrom are
a compulsory aspect of serving in the IAF, meaning thereby that
there is no choice of the individual officer in that matter and instead
is a mandate from the employer. When the aspect of administrative
control is examined, it is seen that all the members of the Board of
Trustees, so also the Managing Committee are serving members
of the IAF and are deputed to AFGIS for a fixed period. In essence,
therefore, the administration of the Body is entirely in the hands of
Government servants even though the body itself is a purportedly
private, a self-contained society. The appellant, in submitting that
financial control also rests with the Government says that since the
mandatory reduction of the premium is directly/automatically from
the salary of the members of IAF and these salaries are charged to
the Consolidated Fund of India- this shows financial control.
138 [2026] 4 S.C.R.

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16. We are unable to accept this contention. It may be that in so far as
financial aspects of AFGIS are concerned, the Government may not
have a direct role however for a body to be held to be a ‘State’ it
is the cumulative effect and impact of deep and pervasive control,
financial and administrative control along with other factors such as
carrying out of public duty.
17. We are of the considered view that AFGIS does indeed perform a
public duty. The protection and welfare of armed forces personnel is
a core government function. The role of the armed forces is directly
linked to the sovereignty and security of the nation and in protecting
the same members of the forces are required to adhere to, abide
by, and maintain a strict set of rules, unquestionable conduct, and at
times in the most severe and adverse circumstances. Thus, providing
insurance coverage is a public function as it addresses a collective
obligation the State has towards a defined public class whose
service is indispensable. The body, in effect, becomes a conduit for
the discharge of that obligation. The role of the State in protecting
them does not end upon their superannuation from service for the
life of a person from the forces is forever shaped by their time in
service. Insurance to service members is a critical instrument for
safeguarding their physical, mental well-being, dignity and economic
security. It operates as an assurance of protection and support in
case contingencies such as disability or illness befall them or even
untimely death which is a real possibility in these services. The fact
that healthcare, rehabilitation, support to dependants is available
readily, is undoubtedly an aspect that gives great peace of mind to
the member of service enabling them to carry out their duties without
worry, at least in this regard.
18. In addition to the discussion above, it is also seen that at one-
point AFGIS itself claimed to be Government while claiming an
exemption from service taxes, since it is under the control of Ministry
of Defence. In effect, by opposing the challenge of the appellants,
AFGIS has resiled from its own statement. We fail to understand
an organisation can be ‘Government’ for one purpose and not be,
for another purpose.
19. Consequent to the above discussion, AFGIS would be ‘State’ under
Article 12. The writ petition before the High Court accordingly,
maintainable. The said writ petition on the grievance of the appellants
[2026] 4 S.C.R. 139

Ravi Khokhar & Ors. v. Union of India & Ors.

is restored. The High Court is requested to decide the same
expeditiously keeping in view the fact that the same has been filed
in the year 2017. Appeal is allowed.
Pending application(s) if any shall stand disposed of.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Ankit Gyan